Anchor Ltd finalised their financial statements for the year ended 31 March 2018 and authorised them for issue on 14 July 2018. The new managing director, who started in August of 2018, is unsure about the treatment of the following eight material events and has asked for your professional advice.

(i) 30 March 2018 The directors declared a final dividend for the year ended 31 March 2018 of $975 000.

(ii) 5 April 2018 Included in the general ledger inventory account at balance date were items of inventory measured at a cost of $980 000. At balance date, the net realisable value of these said items of inventory was $1 300 000. On 5 April 2018, this inventory sold for

$1 600 000 cash.

(iii) 10 April 2018 Included in the general ledger inventory account at balance date were items of slow-moving inventory measured at a net realisable value of $800 000. On 02 April 2018 this inventory was water damaged, and on 10 April 2018, it was sold for $550 000 cash.

(iv) 15 June 2018 - Anchor Ltd noticed that one of its investments (consisting of 180 000 shares in Boston Ltd), measured at a fair value of $5.50 per share on 31 March 2018, were now listed on the stock exchange at $7.20 per share.

(v) 18 June 2018 Anchor Ltd was found liable for a lawsuit and required to pay damages of $570 000. Back in January 2018, a customer Fail Ltd initiated legal proceedings against Anchor Ltd concerning a breach of contract. At 31 March 2018, the entitys legal advisers informed the directors that it was likely that Anchor Ltd would be found liable; a provision of $245 000 was therefore recognised at balance date.

(vi) 3 July 2018 The court found Anchor Ltd liable for a case involving Marks Ltd and Anchor Ltd was required to pay damages of $90 000. Back in December 2017, a supplier, Marks Ltd, initiated legal proceedings against Anchor Ltd concerning a breach of contract. At 31 March 2018, the entitys legal advisers informed the directors that it was unlikely that Anchor Ltd would be found liable; a contingent liability, however, was included in the notes.

(vii) 8 July 2018 An accounts receivable Fail Ltd went into bankruptcy. On 31 March 2018 Fail Ltd owed Anchor Ltd $250 000; Fail Ltd was not considered to be a doubtful debtor.

(viii) 16 July 2018 - A significant error was discovered in the financial statements for the year ended 31 March 2018.

Required:

(a) Prepare a professional report for the managing director of Anchor Ltd to explain the correct treatment of the above eight events. NZ IAS 10 Events after the Reporting Period must be referred to in the introduction to your report.

(b) In the template provided in the answer booklet, show extracts of the financial statements for the period ended 31 March 2018 after adjustments* from the above events.

Note: *adjustments include changes to the disclosure in the notes and adjusting journal entries.

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